Answer to Question #16228 in Economics of Enterprise for babu

Question

Can a country continually have a current account deficit and continue to borrow from the rest of the world?

Answer 1

When one country trades with another, money and financial capital flow between
the countries. The balance of payments account captures this flow. A country
running a current account deficit will borrow from the rest of the world; and a
country running a surplus will lend. In the end, all countries are better off
through trade.